Before the agreement is signed, the junior lender must also specify the definition of „senior debt“ and „junior retirement.“ In addition, it is customary for a lead lender to process the terms of the agreement without the agreement of the junior lender. This is what the junior lender should keep in mind. A senior lender generally wants a junior lender to bear the burden of debts incurred by the borrower. In this case, a junior lender can protect itself by requesting waivers for short-term and limited loans. It should also negotiate an adoption for the exercise of fundamental capital rights, such as holding a shareholder vote in the event of a deadlock.B. The inter-creditor agreement or ICA, which is a direct result of the government`s plan or report on the bad bank, drawn up by the Sunil-Mehta committee, and which will work as follows: the Intercreditor agreement plays a central role in the right to pledge. It is therefore essential that both lenders establish a solid foundation for their rights and priorities in the event of a borrower`s financial capacity failure and late payment. In the absence of such a document, each party can make its own decisions and be inconsistent. The whole trial can be unethical and uneconomic and can quickly turn into a legal disorder in court. Such an agreement also includes the provisions on buyback rights. This right allows a lender to purchase the receivables and pledge rights of other lenders. Such an option triggers bankruptcy proceedings following certain events, such as filing a bankruptcy proceeding.B.
In such a scenario, the government authority may act as a junior lender, the financial (s) as a priority lender and the company (Y) as a borrower. Since the company provides credit to the two financiers with the same property, the senior creditor will in any event want to enter into an intercreditor agreement with the government authority in order to protect its interests. As a general rule, such an agreement limits the payment a borrower can make to junior lenders if the borrower is behind on the terms of the agreement with junior lenders. Such provisions are called „payment freezes.“ This provision even limits payments to which junior lenders are entitled in the normal course of working with the borrower, such as interest or customary fees and expenses. The junior lender should consider meeting the contractual terms for the project in the event of a delay in payment from the borrower. In the event of such a situation, the junior lender should be aware that there are usually only two options: either to inject funds into the project, to remedy financial defaults under the senior lender, or to pay the priority lender. This last point is often almost impossible in cases where the priority lender has provided very large financing. Under the agreement, dissenting lenders may exercise such a right of redemption for all facilities of other lenders concerned.
An intercreditor agreement (or inter-creditor agreement) is a contract between two other creditors. Such an agreement comes into effect when the borrower has two (or more) lenders.